A New Kind of Energy for China

Methanol will become, for China, “a major alternative fuel which does not exist in any other country in the world," said James Brock, a Beijing-based energy consultant. Another commentator, a senior Chinese regional official who is deeply involved in China’s methanol industry, has stated that China’s coal industry “is doing the best job in China in promoting the use of methanol as fuel.” The Chinese official added, “Our aim is to solve the problem of China’s oil shortage. We are creating a new kind of energy.”

The man must mean “a new kind of energy for China.” The technology to turn coal into gas and oil was invented in the 1910s and 1920s in Germany. CTL processes were used extensively to manufacture motor fuel for the German armed forces during the Second World War. Of more recent vintage, CTL technology was greatly advanced by the South African company Sasol over the past three decades. Initially, the Sasol technology was used as a means for South Africa to avoid apartheid-era sanctions, and more recently, Sasol’s technology has been highly competitive in world markets on its own merits.

Large Foreign Investment, Advanced U.S. Technology

Within the past few years, China has been experiencing an investment surge into CTL plants. One recent announcement, for example, stated that Royal Dutch/Shell and a Chinese partner have committed to a three-year study of a CTL plant, which, if it proceeds, will cost between $5-6 billion and be one of China’s largest single foreign investments. The proposed Shell project, to be located in the western province of Ningxia, would produce the equivalent of about 70,000 barrels of oil a day, equal to about 1% of Chinese oil demand, now just over 7 million barrels per day (mpd).

Shell, which is a leader in liquefaction technology, has already licensed its technology to 15 projects in China. Shell has one plant with Sinopec, one of China’s leading petrochemical companies, under construction. According to Lim Haw Kuang, executive chairman of Shell in China, “We have proven technology that converts coal to gas and then gas to liquids. We believe this technology is important to China.”

The Shell process uses oxygenated gasification, a technology pioneered in the U.S., under the sponsorship of quite a bit of U.S. government funding over the years. Oxygenated gasification permits isolating carbon dioxide (CO2) during the manufacturing process, and thus is more compatible with carbon sequestration than other leading fossil fuel technologies. If the Chinese actually sequester the CO2, or use it for purposes such as enhancing oil production from older oil fields, this will be a big step forward for China’s environmental protection, as well as for controlling emissions of greenhouse gases.

What Do the Chinese Know?

The reports out of China present a national goal for that country’s economy to obtain 10% of its liquid fuel by 2011-2013 using methanol produced from its own coal resources. And China’s 10% of liquid fuel from CTL is just the beginning. Within a decade, that number could approach 20%. Moreover, China is also embarking on major, national-scale programs to generate electricity from wind power, as well as from solar photovoltaic systems. It is almost as if the Chinese know something.
Continued 12/3/06